Smead Manufacturing Co.

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Smead Manufacturing Co.

600 E. Smead Boulevard
Hastings, Minnesota 55033
U.S.A.
(612) 437-4111
Fax: (612) 437-9134
Internet site:http://www.smead.com

Private Company
Founded: 1906
Employees: 2, 500
Sales: $217 million (1995 est.)
SICs: 2678 Stationery, Tablets, and Related Products

Smead Manufacturing is the largest U.S. producer of stationery products in the approximately $1.24 billion (1991) U.S. stationery supplies market, which is comprised of three basic product groups: tablets, pads, and related products (62 percent of industry sales in 1987); stationery items (26 percent of industry sales); and loose sheets of filler paper. In the mid-1990s, Smead was the 18th-largest privately held industrial company in the state of Minnesota, and in 1996, Working Woman magazine ranked Smead as the 31st-largest women-owned business in the United States.

Smead’s primary product line is office filing products, from manila folders, expanding files, and top tab and end tab filing systems to color-coded indexing systems, records management software, high-density mobile shelving, and electronic tracking, imaging, and bar code technologies. Other typical Smead products include ring binders, medical X-ray jackets, steel rotary filing components, file pockets, hanging files, and report covers. In the mid-1990s it offered over 2, 000 individual filing products and accessories as well as records management consulting services and customized product services such as customer-specified file prelabeling.

Like other firms in the stationery industry, Smead converts rolled paper stock bought in bulk from paper and paperboard

mills into stationery products using automated technology and sells its finished products to office products retailers and contract stationers. Ranked in general terms as a mid-sized stationery converter, Smead has traditionally competed with the stationery products divisions of large paper manufacturing companies as well as other publicly and privately held independent stationery makers such as Duplex Products, Inc., Avery Dennison Corporation, and Stuart Hall Co. In the mid-1990s, Smead, whose stock is entirely owned by the Hoffman family, maintained seven manufacturing plants in the states of Minnesota, Georgia, Texas, Ohio, Utah, California, and Wisconsin.

“A Better Mousetrap”: 1906-40

The Smead Manufacturing Company was founded in 1906 by Charles Smead, a former salesman for the St. Louis-based wholesale office supply firm of G. D. Barnard and Co. Regarded by his employer as “one of the best men on the road,” Smead had begun casting about for an alternative to the then standard practice of securing office file envelopes with rubber bands, which almost always deteriorated before the envelope itself wore out. Smead’s innovation was the “bandless file,” an envelope designed with durable metal clasps. None of the office supply firms Smead offered it to were interested, however, and Smead resolved to strike out on his own. Operating at first out of a small room above the offices of the Hastings Gazette, Smead’s entire plant-cum-office initially consisted of a printing press, a rack of type, two die-stamping machines, a punch machine, and a few round-cornering machines, which were all hoisted into the 20-by-40-foot room through a window at the rear of the building.

With all of six employees, Smead Manufacturing began commercial production of its bandless files in 1908, but less than a year and half after the product hit the market Smead died, leaving the firm in the hands of his three partners: Otto Ackerman, John Heinen (the registrar of deeds for Dakota County), and Irving Todd (the publisher of the Gazette). In 1916 the three sold the firm to P. A. Hoffman, one of the original six Smead employees, and by 1918 Hoffman had moved the fledgling operation to a larger site. For the next decade, Hoffman presided over Smead’s growth into a significant player in the stationery market and developed his reputation as a respectful, businesslike manager with a keen eye for improving Smead’s productivity. (He was known to point at boxes of packaged product and comment, “that carton has been here two days,” prompting Smead staff to improve delivery times.) When he suffered a debilitating stroke in 1928, his son and employee Harold Hoffman was promoted to help him run the firm. On the strength of the younger Hoffman’s leadership, Smead weathered the Depression until by the eve of U.S. involvement in World War II it had expanded from a single facility to seven separate plants.

Crisis: 1941-55

With the general filing needs of the mainstream business market increasingly covered by its catalog, Smead continued to specialize its product lines to satisfy the unique filing requirements of individual industries. From the early success of the bandless file Smead had added new office filing products—from file folders, dividers, and file pockets to brief covers, binder covers, pressboard folders, and such innovations as the now universal top tab filing system. The outbreak of World War II launched a new boom in paper demand, and the U.S. paper industry as a whole enjoyed a significant sales boost throughout the war. By 1942, for example, Dennison Manufacturing Company—which would become a major Smead competitor in the postwar years—had surpassed its pre-Depression sales levels, and International Paper began supplying nitrate pulp for explosives and waterproof paperboard (or “V-board”) for food shipments to Allied troops. For Smead, the war’s end meant the beginning of an aggressive expansion, which by 1953 included new plants in Logan, Ohio (north of Dayton); Still water, Minnesota (on the Wisconsin border); and nearby River Falls, Wisconsin. Unable to service its rapidly expanding customer base from Minnesota alone, Smead also opened sales and warehousing operations in Chicago and Toronto in the postwar years.

The company also introduced new filing systems to meet the increasingly paper-flooded, space-constrained needs of the modern office. High-density shelf filing systems that increased the amount of records that could be stored in a limited space by almost 100 percent were introduced, color-coded index systems that made file organization and identification easier were unveiled, and new filing accessories and standardized indexing techniques to enhance filing efficiency and reduce misfiling errors were developed and marketed. By 1955, Smead could claim 325 employees and sales of $4 million.

Besides marking the onset of a period of rapid expansion at Smead, the end of World War II also had a personal significance for the Hoffman family. In September 1944, Harold Hoffman, then serving his 16th year for his father as Smead’s de facto president, had married Ebba Benson, a Minnesota native working as a supervisor for thermostat-maker Honeywell in Minneapolis. When the elder Hoffman died at age 74 in 1954, Harold was officially named Smead’s president. Less than 15 months later, however, Hoffman suffered a fatal heart attack while attending a business meeting in Buffalo. Smead’s future was suddenly very much in doubt.

Turnaround: 1955-70

After her husband’s death, Ebba Hoffman was confronted with the daunting responsibility of choosing between abandoning the Hoffman family’s 40-year stake in the Smead name by selling out to a competitor or becoming that rarity in the American business scene of the 1950s—a female owner of a large industrial enterprise. Complicating her decision was the financially precarious condition of the company itself. Despite Smead’s confident expansion in the decade after World War II, growth in the paper industry was slow throughout the 1950s, Smead’s capital resources were depleted by credit obligations, its profits were thin and getting thinner, and the death of P. A. and Harold Hoffman (neither of whom left wills) had saddled the family with estate taxes that only exacerbated the already heavy debt load brought on by Smead’s expansion. As Ebba Hoffman herself described the crisis years later: “There was no money. I had to go to the bank to borrow money to live on.”

Although she had limited formal education, Hoffman had management experience from her days with Honeywell, a desire to see the company survive as a legacy for her heirs, and more than a passing knowledge of the business and its dealers. More immediately, with the health of the Hoffman family estate now in doubt, she needed a job to support her children, Sharon Lee and John Peter. Thus, when a Smead executive asked Hoffman how soon he could move into her husband’s former office, she curtly suggested it might be longer than he hoped and decided to announce her decision to direct the company. In her first months, she decelerated Smead’s expansion program, shut down several unproductive plants and warehouses, and discovered a talented Smead engineer whom she charged with improving and diversifying Smead’s products and designing the new equipment needed to make them.

Company Perspectives:

Businesses preparing for the 21st century are finding that new technologies and work processes are redefining the way information is stored and retrieved within their organizations. Computers, fax machines and sophisticated workflow techniques have all improved office efficiency, but they’ve also created an explosion of information that needs to be kept organized. To be successful in the new millennium, it will be essential to develop and maintain well designed records management systems. Flexibility and ease of use will continue to be the factors that describe the systems that keep organizations running smoothly. Smead has been designing and manufacturing innovative records management systems and techniques for more than 90 years. As we look to the future, our commitment to our customers remains the same; to provide the highest quality systems and supplies for all types of records management, with the same ultimate purpose —keeping you organized.

Within three years of her husband’s death Hoffman had extended Smead’s operations to the West Coast through the acquisition of the manufacturing and distribution operations of the Yale Filing Company of Los Angeles. It would operate as a division of Smead until 1969 when Hoffman decided to abandon the Yale name and fully merge its operations with Smead. In 1962 she unveiled a new 140, 000-square-foot factory and headquarters building for Smead at its Hastings home. A strike by Smead workers the same year forced Minnesota governor Elmer Andersen to call in police officers to protect Smead’s plant. When Hoffman refused to give in to workers’ demands, Governor Anderson threatened to recall his troopers. Hoffman’s response was to invite him to do just that: she refused to “give the company away” just to please the State of Minnesota. Her reputation for toughness was reinforced again when a Smead executive mistakenly allowed company inventories to climb so high that Hoffman was forced to borrow money to underwrite the error: mistake or not, Hoffman abbreviated the manager’s Smead career.

By 1964 Smead’s business in the Midwest had grown so large that a new manufacturing plant was constructed in Logan, Ohio, as well as an expanded warehouse and sales facilities, designated the Central Distribution Center, in Chicago. The Logan facility now enabled Smead to manufacture and store its products—from raw materials to finished goods—under one roof. Throughout the 1960s Smead modernized its catalog—which now offered more than three thousand products—to include filing systems and products for the emerging computer industry and new products designed for specific industries. Folders were developed that allowed computer tapes to be handily stored indefinitely; specialized check file guides were designed for the filing needs of the bank and building and loan industries; and wallets and pockets were marketed to hold marriage licenses, reports, and virtually any other document. Smead’s growing sophistication in anticipating its customers’ needs through research and development also resulted in the creation of color coded filing systems and the Smead “Terminal Digit Indexing System,” which quickly claimed market share among insurance firms, medical record librarians, and government agencies.

By avoiding new debt and business ventures outside Smead’s traditional niche, Hoffman had guided the company’s sales by the late 1960s to a 300 percent increase over 1955, making the period the most productive in company history. Production, sales volume, and inventory were all on the rise, and in 1968 Smead enlarged its new Hastings plant by 30 percent and drew up plans for the expansion of its administrative offices and computer system, which now performed everything from accounting, interplant communication, and analysis to inventory and quality control. Moreover, Smead’s West Coast operation was expanded through the purchase of a larger plant in Pico Rivera, California. In 1970, Smead’s sales finally passed the $14 million mark. Four years later, Smead gained a small but symbolic place in America’s cultural iconography when resigning President Richard Nixon was shown departing from the White House with one of Smead’s ubiquitous filing boxes under his arm; Smead’s penetration of the U.S. filing supplies market seemed complete.

At the Top: 1970-96

Despite the stagflation and economic uncertainty of the 1970s, between 1970 and 1981 Smead’s revenues grew at a compound annual rate of 18 percent, breaking past the $80 million mark in 1981. Between 1975 and 1981 alone, Hoffman increased Smead’s plant and warehouse capacity by three-quarters, funding the entire expansion through reinvested profits. A new 75, 000-square-foot plant (Smead’s fifth) was opened in McGregor, Texas, in 1971 to expand Smead’s ability to service its customers in the Southwest. As a result of such determined reinvestment, Smead’s year-in, year-out profits were only “adequate,” one Smead executive admitted, “but ... consistently adequate.” By 1981, Hoffman could claim that Smead had not endured a single year of earnings decline since she assumed the company’s reins.

Befitting a mature industry that has tapped its potential market, the U.S. stationery products industry experienced flat sales throughout the 1980s and early 1990s and relied on growth in the general economy to enhance sales. Increasing public awareness of the impact of heavy paper use on the environment; the growing use of personal computers in both homes and offices, reflecting a general shift toward the so-called paperless economy; and a spate of corporate downsizings beginning in the 1980s meant potentially smaller markets for office stationery and filing systems. Smead adjusted to the threatening trends, however, adopting a ten to 30 percent recycled-paper content requirement for its paper products (without increasing its prices) and moving to position itself not as a mere supplier of filing supplies and stationery but as a forward-thinking innovator of “total filing solutions” for “records and document management.” To that end, in the late 1980s it introduced bar code tracking methods that virtually eradicated misfiling errors. It also introduced “Smeadlink,” an integrated software program that enabled users to index, track, and retrieve their entire range of business documents, from faxes, scanned documents, labels, and file tabs to E-mail and electronic and hardcopy paper documents. The product represented an aggressive attempt to single-handedly position Smead as a bridge between the “old” world of paper files and the digital age of paperless communication.

Smead also sought to reduce labor costs and expand its production capacity. In 1993 it announced it was moving some of the one thousand jobs at its Hastings and River Falls facilities to a leased plant in Mexico but hoped to minimize the impact of the move on its U.S. workers by reassigning them to different jobs and transferring to Mexico only those jobs currently held by retiring U.S. workers. In 1996, it announced that a year-long search for a site for a new $14 million manufacturing facility had concluded with the selection of Cedar City, Utah. When operational in 1997, the plant would employ 225 semiskilled workers and would give Smead the capability to provide one-day service to the West Coast and Denver.

At age 84, Ebba Hoffman—still chairwoman and president of Smead and the first woman elected to the Minnesota Business Hall of Fame (1977)—continued to groom her daughter, Sharon Lee Hoffman Avent, to one day succeed her, promoting her to senior executive vice-president in 1995.